Luna Announces $50 Million Strategic Investment from White Hat Capital Partners
December 21 2023 - 9:34AM
Business Wire
Investment Proceeds Used to Fund Silixa
Acquisition and Enhance Luna’s Financial Flexibility to Pursue
Strategic Growth Initiatives
Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in
advanced fiber optic-based technology, today announced a $50
million investment by White Hat Capital Partners (“White Hat”), an
investment firm focused on sustainable value creation in technology
companies serving mission-critical applications.
Proceeds from this strategic investment were partially used to
fund the acquisition of Silixa, also announced today, and related
transaction costs in the aggregate amount of approximately $25
million. Remaining proceeds were used to repay the Company’s
outstanding $17 million term loan with PNC Bank and strengthen the
Company’s balance sheet.
Luna expects to apply the proceeds of this investment across a
range of initiatives already in process to accelerate growth and
increase profitability, including:
- Capitalizing on Inflection Point for Adoption of Fiber Optic
Sensing Solutions: Aging infrastructure and rising security
concerns for pipelines and critical infrastructure have led to
increased market adoption of fiber optic sensing technologies for
structural health monitoring. Luna is well-positioned to implement
its solutions and drive recurring revenue through continuous
monitoring of these key assets, such as bridges, tunnels and
pipelines.
- Increasing Manufacturing Capacity to Meet Demand Arising from
Strategic Partnerships: Luna has cultivated strategic relationships
with several large global customers that are now expanding their
use of Luna’s solutions, increasing demand for Luna’s
products.
- Enhancing Investments in Innovation: Luna intends to leverage
its increased financial flexibility to execute against its robust
product roadmap and continue to be a leading developer of
innovative technologies with new applications, building upon its
already large library of intellectual property.
In conjunction with the strategic investment, David Chanley
joined Luna’s Board of Directors. Mr. Chanley is a Co-Founder and
Managing Partner of White Hat and has more than 20 years of
experience in the technology sector. With this addition, Luna’s
Board expanded to eight members.
“We are thrilled to welcome White Hat as a new partner,” said
Scott Graeff, President and Chief Executive Officer of Luna. “David
and his team bring years of experience advising and supporting
technology companies, particularly in the optics and test &
measurement industries. When I first met them, I was struck by how
well they understood both our industry and our technologies. Their
investment is not only a vote of confidence in the acquisition of
Silixa, but also a strong endorsement of our strategic vision and
market opportunities.”
“White Hat is excited to partner with the Luna management team
to support the Company in its next stage of growth,” said David
Chanley, Managing Partner at White Hat Capital Partners. “Our
thorough evaluation highlighted the quality and depth of Luna’s
management team and the promising addition of the talented team
from Silixa. With additional scale and financial flexibility, Luna
is uniquely positioned as the largest pure-play company to address
the rising demand for fiber optic sensing solutions in its key end
markets. These include pivotal roles in energy transition
initiatives like carbon capture and storage (CCS) and electric
vehicle (EV) adoption, as well as critical structural health
monitoring and specialized aerospace & defense applications. We
are eager to partner with Luna as the company accelerates its
mission of enabling the future with fiber.”
Summary of Investment Terms
White Hat has initially purchased 52,500 shares of Series B
convertible preferred stock at a purchase price of $50.0 million.
Each share has an initial liquidation preference of $1,000 per
share and subject to certain conditions and limitations will be
convertible into shares of Luna common stock, beginning one year
from issuance, at a conversion price of $6.70 per share,
representing a 10% premium to the Company’s 30-day volume-weighted
average price. The preferred stock will accrue quarterly dividends
payable, at the Company’s option, at either 8.5% annual rate if
paid in cash or a 10% annual rate if paid in kind. Until December
21, 2026, White Hat will have the right to purchase up to an
additional $12.5 million of Series B convertible preferred stock at
par and otherwise on the same terms. Further details concerning the
transaction and the terms of the Series B convertible preferred
stock will be included in a Current Report on Form 8-K to be filed
by the Company with the Securities and Exchange Commission.
Cooley LLP acted as legal advisor to Luna and Schulte Roth +
Zabel LLP acted as legal advisor to White Hat in the
transaction.
About Luna
Luna Innovations Incorporated (www.lunainc.com) is a leader in
optical technology, providing unique capabilities in
high-performance, fiber optic-based, test products for the
telecommunications industry and distributed fiber optic-based
sensing for a multitude of industries. Luna’s business model is
designed to accelerate the process of bringing new and innovative
technologies to market.
About White Hat Capital Partners
Founded in 2016, White Hat Capital Partners LP focuses on
concentrated, value-oriented investments in publicly-traded
technology companies. White Hat partners with its portfolio
companies to improve strategy and capital allocation decisions,
implement operational efficiencies and strengthen governance, all
with a view toward improving corporate competitiveness and creating
shareholder value. The Firm is based in New York. For more
information, visit www.whitehatcp.com.
Forward-Looking Statement
The statements in this release that are not historical facts
constitute “forward-looking statements” made pursuant to the safe
harbor provision of the Private Securities Litigation Reform Act of
1995 that involve risks and uncertainties. These statements include
statements concerning the application of the proceeds of the
financing, the investors’ potential investment exercise of their
option to purchase additional Series B convertible preferred stock,
Luna’s ability to drive recurring revenue growth, the potential
increased demand for Luna’s products, Luna’s expectations regarding
technological capabilities, industry trends, revenue and market
opportunities, market growth, customer relationships and
operational efficacy related to its technology and/or products.
Management cautions the reader that these forward-looking
statements are only predictions and are subject to a number of both
known and unknown risks and uncertainties, and actual results,
performance, and/or achievements of Luna may differ materially from
the future results, performance, and/or achievements expressed or
implied by these forward-looking statements as a result of a number
of factors. These factors include, without limitation, changes in
market needs and technological challenges, competitive forces and
other risks and uncertainties set forth in Luna’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2023 and Luna’s
other periodic reports and filings with the Securities and Exchange
Commission (“SEC”). Such filings are available on the SEC’s website
at www.sec.gov and on Luna’s website at www.lunainc.com. The
statements made in this release are based on information available
to Luna as of the date of this release and Luna undertakes no
obligation to update any of the forward-looking statements after
the date of this release.
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version on businesswire.com: https://www.businesswire.com/news/home/20231221106551/en/
Investor Contact: Allison Woody Luna Innovations
Incorporated Phone: 540.769.8465 Email: woodya@lunainc.com
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